Review of the BBC s Research & Development Activity

Review of the BBC s Research & Development Activity January 2018

Contents 1. Executive Summary... 3 2. Introduction and context... 10 R&D has contributed to many of the BBC s most significant achievements... 10 The Government mandate to innovate... 10 Now is an appropriate time to review the BBC s R&D activity... 12 3. Why R&D matters to the BBC, its audiences and the wider media industry... 14 The BBC s public service mission drives a distinctive approach to innovation... 14 Delivering for audiences and society in line with the BBC s public purposes... 14 Giving the creative community the tools to fulfil the BBC s public purposes... 15 Cost-effective innovation and value for money... 16 Delivering value to industry and the UK... 17 4. Assessment of the impact of BBC R&D, 2007-16... 19 BBC R&D employs just over 200 people and spends around 18m pa... 19 BBC R&D delivered benefits to audiences and society... 19 BBC R&D developed tools that enabled the creative community to meet the BBC s public purposes in new ways... 22 BBC R&D supported cost-effectiveness and value for money... 22 BBC R&D delivered value to industry and the UK... 23 Economic benefits: DotEcon s independent assessment... 25 Learning lessons... 27 5. Objectives for the 2017-27 Charter period... 30 R&D s role remains vital, but needs clear strategic focus... 30 R&D s objectives are driven by wider BBC strategy... 31 Renewing R&D s rationale in a new Charter period... 31 Seven objectives for the 2017-27 Charter period... 35 New collaborative models will be needed... 36 6. Conclusions... 39 2

1. Executive Summary This report fulfils the BBC s commitment to review its research and development activity 1. Research and development has been an integral part of the BBC s public service contribution over the past 90 years. Some of the most significant advances in broadcast technology began in the BBC s R&D department, including noise-cancelling microphones in the 1930s, the first transatlantic television transmission in the 1950s, Ceefax in the 1970s, digital radio in the 1990s and digital TV in the 2000s. The department was the driving force behind the BBC s pioneering move online in the mid 1990s. 2. As technology continues to develop, the start of the BBC s new 11-year Charter represents an appropriate moment for reflection, and provides an opportunity to assess R&D s impact and consider objectives for the future. 3. In the December 2016 Framework Agreement, the BBC undertook to review its R&D activity, including: a. A cost-benefit analysis (which includes an analysis of the value delivered for the public and the creative and wider economy) b. A qualitative assessment of the success achieved as a result of the investment in research and development activity taking into consideration at least the previous Charter period, and up to the date of the review; and c. Consideration of objectives for the future, and potential ways in which the BBC may be able to improve collaboration with others. 4. This report contains the findings of that review, which included three analyses: an independent assessment by DotEcon of the costs and benefits of BBC R&D activities (published separately alongside this review); an internal qualitative assessment of the impact of R&D activity over the 2007-16 Charter period; and a review of objectives for the future and opportunities to improve collaboration, drawing on interviews with senior leaders across the BBC. 5. Overall, we find that the BBC s R&D activity over the Charter period delivered substantial value to audiences, the UK creative sector and the economy as a whole. It will remain an essential and distinctive aspect of the BBC s public service activities in the 2017-27 Charter. But changing market and technological conditions will require the BBC to continue to evolve its focus and partnership models. Four drivers for R&D activity 6. Our review has identified four motivations for the BBC s R&D activity. 7. First and foremost, R&D can deliver value to audiences and society, aligned with the BBC s public purposes. It innovates for universal benefit, for example developing Internet streaming technologies and TV platforms that have made the opportunities of connected 3

media as widely available and taken up as possible, while also ensuring that public service broadcasting remains prominent and easy to access. It played a major role in ensuring that no home was left behind during digital switchover. It invests in technologies that deliver new forms of public value and for which a commercial model may not exist examples in the 2007-16 Charter period include the BBC micro:bit coding platform and research into subtitle speeds. 8. Secondly, R&D can give the creative community (inside and outside the BBC) the tools it needs to fulfil the purposes of public service media by delivering exceptional and distinctive content to audiences. Early innovations in emerging technologies pave the way for later mass-audience deployments that can transform the value the BBC, and other broadcasters, delivers to audiences. 9. Thirdly, R&D can support cost-effectiveness and value for money, by cutting costs, avoiding future costs, making innovation affordable by creating efficient ways to do new things, or by creating assets capable of commercial exploitation. In meeting this goal it is necessary to balance the potential commercial value of exploitation of proprietary intellectual property with the public value of making new technologies widely and cheaply available. 10. Finally, R&D can achieve these goals in such a way that it delivers value to the wider industry and the UK, by opening up the benefits of innovation to other organisations, supporting and driving pan-industry collaboration and acting as an ambassador for the UK in an increasingly global media sector. It creates routes to market for new businesses and talent, through open innovation initiatives like BBC Backstage, Taster, News Labs and Connected Studio. 11. Successful initiatives will generally serve more than one goal. For example, innovations in Object-Based Media (OBM), which exploits the interactive potential of online video and text to deliver audiences more personalised, immersive, flexible and reusable content, will add creative value to audiences as well as generating savings. 12. Government has given the BBC specific direction with respect to R&D activity. In the 2007-16 Charter, the BBC s sixth public purpose was helping to deliver to the public the benefit of emerging communications technologies and services, and, in addition, taking a leading role in the switchover to digital television. The current 2017-27 Charter specifies that the BBC must promote technological innovation, and maintain a leading role in research and development, that supports the effective fulfilment of its Mission and the promotion of the Public Purposes, and in doing so must focus on technological innovation to support the delivery of the UK Public Services, non-service activities and the World Service, seek to work in partnership with other organisations, and share, as far as is reasonable, its research and development knowledge and technologies. 1 Under the terms of the December 2016 Framework Agreement, the BBC committed to conduct R&D activities which aim to maintain the BBC s leading role in research and development in broadcasting and other 1 Royal Charter for the Continuance of the British Broadcasting Corporation ( BBC Charter ), Dec 2016, s15 4

means for the distribution and consumption of audio, visual and audiovisual material and other content, and in related technologies. 2 Our evaluation found significant benefits, for audiences, the creative community, the wider industry and the UK economy, from R&D activity in the 2007-16 Charter 13. Over the last decade, the BBC spent 161m on R&D activity. It currently employs c. 205 people, based in research laboratories in Salford and London. It forms part of the BBC s Design & Engineering division, whose objectives are to build a world class technology division, drive the digital transformation of the BBC and be the catalyst for the BBC of the future. R&D plays an active role in all these objectives. Its priorities are also set with reference to the BBC s wider strategic objectives and public purposes. 14. Based on both the internal and external analyses conducted for this review, we have assessed the impact of the BBC s R&D activities in the 2007-16 Charter, with respect to the drivers identified above. 15. For audiences and society, R&D enabled the BBC to deliver new types of content, more flexibly, to higher quality standards. Over the Charter period, BBC R&D gave audiences significantly better picture quality, innovative sports graphics, greater accessibility through improved subtitles, a wide range of new creative experiences and enhanced coverage of national events like General Elections, Glastonbury and the Olympics. R&D provided significant investment and technical contribution to Freeview Play, Freesat and YouView, working collaboratively with industry partners. These platforms helped ensure public service broadcasting whether broadcast or online remained universally available, prominent and widely used. 16. The creative community benefited from R&D s leadership in online innovation, which dates back to the early years of the Internet, in which the BBC played a pioneering role as one of the first large organisations to be online. BBC R&D was the driving force behind introducing the BBC to the Internet and educating the organisation, and the wider UK media sector, about the advantages of Internet technology. Between 2007-16, it continued to set the direction for the BBC s Internet transition; R&D s early work on Internet technologies, and trials of new forms of content delivery such as online streaming, provided know-how for the launch of BBC iplayer in 2007. The Redux online archive opened up new opportunities for BBC content-makers to experiment with the re-use of historic material. More recently, the BBC has used OBM to create new experiences in news and drama that complement and enrich traditional TV and online output. 17. With respect to cost-effectiveness and value for money, the BBC Internet Distribution Infrastructure (BIDI) initiative gave the BBC greater control over online distribution of its content, and will help manage costs in this rapidly growing area. New technologies were developed for commercial exploitation, such as the Piero sports graphics system, launched as a product with Ericsson. The BBC used R&D s patent portfolio both to ensure that where appropriate it can secure the commercial value of its innovations, and also to support the 2 An Agreement Between Her Majesty s Secretary of State for Culture, Media and Sport and the British Broadcasting Corporation ( BBC Agreement ), Dec 2016, s65 5

industry in taking up standards and technology for the benefit of all audiences, by ensuring that technology was made available on affordable terms. 18. The wider industry benefited from R&D s role in supporting and driving pan-industry collaboration. R&D staff contributed to the development of industry-wide technology solutions (for instance in the development of the AS-11 file specification to help the broadcast industry move from tape-based programme delivery to a common file-based approach). They played a major role in industry forums, for example by chairing World Wide Web Consortium (W3C) working groups, engaging in the 3GPP 5G standards forums, and chairing the Digital Video Broadcasting (DVB) technical subtitling group. And BBC Backstage and Connected Studio enabled hundreds of new developers, storytellers, academics and entrepreneurs to create new types of media experiences and exploit new technical and commercial opportunities. 19. Over the last few years, the BBC pioneered a move from broadcast industry-specific production architecture to one based on generic Internet technologies. This will reduce the industry s dependence on specialised equipment and make it easier to support flexible workflows, such as remote production. The BBC worked closely with industry throughout, leading several industry bodies to develop the architecture, and a collaborative working group, the Networked Media Incubator, to develop, test and standardise Internet Protocol (IP) production standards. The technology is now sufficiently mature that industry is adopting it at scale, and an industry body has formed with members including Sony, Cisco, NBC Universal as well as other important members like Grass Valley and Snell Advanced Media, to promote solutions compatible with these standards. 20. The UK as a whole derived economic value from this activity. DotEcon s independent quantitative analysis finds net economic benefit of between 5-9 for every pound spent by BBC R&D over the 2007-16 Charter period. This is based on a weighted average cost-benefit ratio of case studies, aggregated to the department as a whole. This estimate does not account for all future benefits and assumes smaller projects do not generate any benefits, and as such we believe is conservative. The report concludes that there are direct benefits to BBC viewers and listeners, direct financial benefits to the BBC (cost savings and licensing revenues), indirect benefits to the BBC (such as the value to audiences of time spent with BBC services) and spillover benefits to the wider broadcast and audiovisual sectors. 21. Some projects have delivered significantly greater return. For example, DotEcon estimates that the Piero system has delivered 46-77m of benefits to date, for a cost of just over 1m. 22. DotEcon cites several benchmarks that show similar cost-benefit ratios from research and development programmes, including InnovateUK s Smart R&D financing programme (costbenefit ratio of between 1:4 1:5); the Technology Strategy Board s Collaborative Research and Development programme ( 6.71 benefit for every pound spent); and the EU Horizon2020 programme that expects to deliver benefits of 6-8 for every Euro invested. 6

As the pace of innovation quickens, R&D s role will remain vital, but must adapt to changing market and technological conditions 23. R&D will need to continue to evolve to maintain its distinctive value and impact in the 2017-27 Charter. Looking ahead, the media and technology sectors will become more global and more complex, and the pace of change will continue unabated. As audience behaviour and consumption patterns develop, new technologies, markets, competitors and partners will need to be addressed; there is a risk of reliance on tried-and-trusted relationships and familiar technologies. The market will deliver a great deal of innovation, and R&D must work out carefully where it can best leverage its capability and where its involvement is essential to delivering public value. 24. Three areas stand out as particularly significant. Firstly, evolving Internet and mobile standards will shape the media ecosystem and determine the future of media distribution the effectiveness of R&D s participation in industry groups and its engagement with the wider sector will be more important than ever. Secondly, the shift from bespoke industryspecific technologies to generic IP-based approaches in content production will open up fresh creative opportunities. Thirdly, new approaches to content production and distribution will drive creative innovation, enabling new content and storytelling formats. R&D has worked with partners to play a major role in these developments; it must now help the BBC, and the UK s wider creative community, adapt to and exploit the new possibilities. 25. So looking ahead, BBC R&D will continue to have a number of vital roles to play. It must help transform the BBC to ensure it fulfils its public purposes while adapting effectively to this changing context. Specifically, it must help prepare the BBC for a smooth transition to Internet delivery, focusing on delivering value for younger audiences, and placing personalisation, participation and partnership at the core of the BBC s services and operating model. It will do this both through leading its own initiatives and partnerships, and also by providing in-house expertise to support BBC creative teams as they explore the possibilities of new technologies. 26. And it must engage internationally, through forums like W3C, 3GPP, ITU, DVB, and the MPEG audio and video compression standards body, to ensure the BBC s commitment to universal free-to-air public service media can be delivered in a new technological environment. 27. R&D s specific objectives for the 2017-27 Charter period take into account these considerations, and are driven by the wider objectives of the BBC. They are to: a. Develop new types of content for audiences, taking advantage of Internet and data-driven technologies, and becoming more personal, interactive, immersive, adaptive, dynamic and responsive b. Influence the development of the next generation of audiovisual standards and norms, and prepare the BBC for their adoption in order to continuously improve sound and picture quality for audiences in an Internet-driven world 7

c. Develop and test new forms of public value, anchored in the BBC s public purposes, thereby taking advantage of technology to create experiences for audiences that go above and beyond television, radio and online d. Develop insights into Internet-led production technologies that enable new types of content, reduce costs and enhance creativity across the global industry e. Support and improve existing distribution approaches, and prepare the BBC and industry for an Internet-led distribution future that supports the public service mission and ensures that content is capable of being delivered in, and takes advantage of, future distribution and consumption environments f. Capture and store content, personal and meta data in such a way that it can be efficiently and effectively used in creating new types of content, and create the tools for analysing and using that data g. Provide the means to create a collaborative ecosystem for producers, content makers and audiences, taking advantage of Internet capabilities 28. As market context, technical capability and audience behaviours continue to change, these objectives will flex to adapt over the next ten years. Given the pace of change, it is appropriate that R&D has discretion to evolve its strategy, objectives and activities. Evolution in R&D s objectives will be managed through existing governance processes, including an annual planning process, regular project reviews, and outcome monitoring. 29. While it is too early to specify in detail exactly what specific initiatives will be required from R&D over the whole of the 2017-27 Charter period, our review of ongoing and planned activities in these areas suggest they are well aligned to the strategic challenges faced by the BBC. They will: a. Benefit audiences and society in line with the BBC s public purposes, giving them access to more personal, responsive and shareable experiences, and seeking to bring the benefits of Internet connectivity to all audiences; b. Give the creative community the tools they need to deliver the public purposes in an Internet- and mobile-first age, for example with the further development of Object-Based Media, working with partners to create content that is aware of the user and user surroundings and can be repurposed across different channels, enabling multiple experiences to be built from a single content asset; c. Enhance the BBC s cost-effectiveness and value for money, for example by managing the BBC s costs of distribution, driving efficiencies in production and rolling out low-cost automated transcription tools; and d. Deliver value to industry and the UK, for instance by working with others to build a new technical ecosystem capable of delivering new content types, and based on common standards that make these new formats universally available. 8

30. R&D must continue to evolve its focus and skills to secure these benefits. While much of its current activity will continue to remain relevant, some areas will change; and some entirely new challenges will need to be addressed, both in the interests of audiences and for the wider benefit of industry. R&D has always worked in partnership, but its future success depends on collaboration with an evolving, and growing, set of organisations. Its partnership models and choice of partners will need to flex accordingly. While it is building on a solid foundation of successful innovation in partnership, R&D will need to adapt its convening, open and public service approach to new challenges. 9

2. Introduction and context R&D has contributed to many of the BBC s most significant achievements 31. Research and development has been part of the BBC s DNA from the beginning of the organisation in the 1920s. Its mission and purpose is enshrined in the BBC s most recent Royal Charter and the associated Charter agreement. 32. Over the past nine decades, the BBC s R&D department has been responsible for some of the most significant advances in broadcast technology, delivering significant benefits to audiences, the UK economy and the global broadcasting industry. Examples include noisecancelling microphones in the 1930s, the first transatlantic television transmission in the 1950s, Ceefax in the 1970s, digital radio in the 1990s and digital TV in the 2000s. Common household brands such as BBC Red Button, BBC iplayer and the UK s free-to-air platforms Freeview, Freesat and YouView were all launched with significant input from BBC R&D. 33. The department led the BBC in recognising the opportunities of the Internet in its very early days. 3 BBC R&D s work to make the BBC, and the wider broadcasting community, Internetfit reach back to the mid-1990s when the department was the driving force behind moving the BBC to the Internet and educating the organisation, and wider UK ecosystem, about the advantages of online technology. At a time when few large organisations were going online, the BBC pioneered digital content, ways of working and service innovation. R&D was central to this, including supporting the BBC Networking Club in 1994 within a few years of the invention of the World Wide Web which helped non-technical audience members to access the Internet. 34. Now technological development and change are happening faster than ever. The BBC operates in an increasingly global sector. Drivers of innovation include some of the world s biggest and best-funded firms as well as start-ups. 35. So the BBC s approach has evolved. It collaborates with an increasingly wide range of partners, complementing and supporting market innovation. It prioritises distinctive activity consistent with the BBC s public purposes, and that delivers value for money for licence fee payers. The Government mandate to innovate 36. R&D s ongoing role in the development and propagation of media and communications technologies is not only a matter of choice by the BBC. It has been a core element of the BBC s mandate from Government since the introduction of the public purpose framework in the 2007-16 Charter. One of the BBC s six public purposes in that Charter was: 3 http://www.bbc.co.uk/programmes/p01xz2d9 10

in promoting its other purposes, helping to deliver to the public the benefit of emerging communications technologies and services and, in addition, taking a leading role in the switchover to digital television. 4 37. So the BBC had a specific responsibility to help lead the switchover from analogue to digital broadcasting, but also a wider objective to help make the benefits of Internet- and mobilecentric media available to the public. This did not require the BBC itself to lead the way in new technology, ahead of the market, and in fact it did not do so. It almost always worked with other partners, complementing commercial innovation, rather than working independently. 38. However, fulfilling this mandate required the BBC to retain its own R&D capability to ensure that the needs of its audiences and creative teams were served by technological developments. R&D needed to have the technical expertise and track record to earn a seat at the table in the international forums and working groups that increasingly determine how new technologies develop and are implemented. In return, this secured the BBC s influence over developments and helped ensure that its audiences interests, and the wider public good, are taken into account. 39. In the 2017-27 Charter, this broad duty is reiterated and expanded. While no longer included in the BBC s public purposes, the Charter specifies that: The BBC must promote technological innovation, and maintain a leading role in research and development, that supports the effective fulfilment of its Mission and the promotion of the Public Purposes. In complying with this article, the BBC must (a) focus on technological innovation to support the delivery of the UK Public Services, non-service activities and the World Service; (b) seek to work in partnership with other organisations; and (c) share, as far as is reasonable, its research and development knowledge and technologies. 5 40. The Agreement provides further detail: The BBC must ensure that it conducts research and development activities geared to the fulfilment of the Mission and the promotion of the Public Purposes and which aim to maintain the BBC s leading role in research and development in broadcasting and other means for the distribution and consumption of audio, visual and audiovisual material and other content, and in related technologies. In carrying out [this] function, the BBC must pay particular attention to supporting and engaging actively in national and international forums for the development of open standards (that is to say, technologies where opportunities to participate in their creation are made widely available, free of charge or on terms that are fair, reasonable and non-discriminatory). 4 BBC Charter, October 2006, s4(f) 5 BBC Charter, December 2016, s15 11

These activities should be conducted both within the BBC and, as much as possible, in co-operation with suitable partners, such as university departments and businesses which are active in relevant fields of research and development or the practical application of the fruits of such research and development. The BBC must keep its research and development activities under review, and must (in particular) ensure that an appropriate balance is struck between (a) the potential for generating revenue through commercial exploitation of its intellectual property, and (b) the value that might be delivered to the public and the UK economy by making new developments widely and openly available. 6 41. Having undertaken a comprehensive review of the BBC s remit in the Charter Review period, including consulting on what role the BBC should have in influencing the future technological landscape, the Government has concluded that the BBC must continue to innovate as it has up till now in support of its purposes, in the interests of its services and creative talent, collaboratively and in ways that secure both commercial benefit and the public value of wide and open availability. Now is an appropriate time to review the BBC s R&D activity 42. The BBC s new 11-year Charter came into effect on 1 January 2017. The start of a new Charter is a good opportunity for reflection on the impact of activities over the previous decade, and consideration of objectives looking ahead, taking into account the rapid pace of change in technology. 43. Under the terms of the BBC Agreement, 7 the BBC agreed to undertake and publish a review of its research and development activity, including: a. A cost benefit analysis (including an analysis of the value delivered for the public and the creative and wider economy); b. A qualitative assessment of the success achieved as a result of the investment in research and development activity, taking into consideration at least the previous Charter period, and up to the date of the review; and c. Consideration of objectives for the future, and potential ways in which the BBC may be able to improve collaboration with others to deliver increased value for the public as a result of this work. 44. The BBC has now concluded that review, and this report contains the findings. To inform the review, the BBC conducted three analyses which are summarised in this document: a. The BBC commissioned DotEcon, an economic consultancy, to carry out an independent analysis of the cost and benefits achieved by BBC R&D. DotEcon analysed a selection of case studies from across BBC R&D s project portfolio and, using microeconomic techniques, calculated the net benefits of each case. They used these results to model the overall benefits generated by BBC R&D as a 6 BBC Agreement, December 2016, s65 7 BBC Agreement, December 2016, s65(4) 12

whole, and compared this to benefits delivered by other applied research initiatives. DotEcon s full report is published alongside this review; b. The BBC carried out a qualitative assessment of the impact of BBC R&D s key achievements during the Charter period and the benefits they delivered to our audiences, the BBC, and industry including the wider creative industry. The assessment was undertaken internally, combining the qualitative observations from DotEcon s analysis with a range of other internal and external sources; and c. The BBC reviewed R&D s forward-looking objectives and potential ways in which its collaborations may increase public value. This review was also developed internally, through interviews with senior leaders across the BBC, and a review of BBC R&D s history of academic and industry collaboration. 45. The review is concerned with the activities described in the BBC Agreement section 65 (see above), that is research and development activities geared to the fulfilment of the Mission and the promotion of the Public Purposes and which aim to maintain the BBC s leading role in research and development in broadcasting and other means for the distribution and consumption of audio, visual and audiovisual material and other content, and in related technologies. Almost all of these activities take place within the BBC s R&D department, which is therefore the focus of this report. 46. The report is in four sections. It first sets out the rationale and purposes of BBC R&D activity. It then assesses the demonstrable impact of R&D activity over the 2007-16 Charter period, and lessons learned. It then addresses forward-looking considerations, and objectives for the 2017-27 Charter period, and sets out the conclusions of its review of collaboration. Finally there is a short summary of conclusions. 13

3. Why R&D matters to the BBC, its audiences and the wider media industry The BBC s public service mission drives a distinctive approach to innovation 47. BBC R&D s activity is first and foremost for the benefit of audiences. And, because of the BBC s universal mission, it takes a particular approach to innovation, that seeks to bring the benefits of new technology to everybody. As the BBC s Chief Technology and Product Officer, Matthew Postgate, said in July 2017: it is not just innovation that is in our DNA; it is also the ability to shape that innovation in the interests of society. 8 48. Of course the BBC does not have a monopoly on socially valuable innovation. So BBC R&D must consider, in deciding where to prioritise its activities and investment, how to deliver distinctive public value. Because the BBC does not have to account to commercial shareholders, it can invest in areas or ways that the market would not. 49. These considerations are relevant even during a time of great commercially-driven technological change. In some respects they become more important, since as technology creates new opportunities, the BBC plays an important role in bringing the benefits to all audiences, and ensuring that new technologies are put to public service as well as commercial ends. 50. This review has identified four enduring drivers for the BBC s R&D activity: to deliver benefit to audiences and society, aligned with the BBC s public purposes; to give the creative community inside and outside the BBC the tools to enable it to fulfil the public purposes; to make what the BBC does cost-effective and value for money; and to deliver value to industry and the UK. We consider each in turn, with some illustrative examples. Typically, particular projects address multiple objectives, although we have emphasised the primary purpose of the case studies mentioned here. Delivering for audiences and society in line with the BBC s public purposes 51. The BBC has a unique set of objectives, enshrined in its public purposes. 9 These purposes drive strategic priorities focused on delivering for all audiences and for wider social benefit. 52. For example, BBC R&D works to ensure new technologies, such as catch-up TV and Internet streaming, are available to all UK homes. This prompted the development of the YouView, Freesat and Freeview Play connected TV platforms, which enable audiences to discover and catch up on programmes, and benefit from the flexibility of connected capabilities, in a familiar EPG-driven interface in affordable integrated TVs and set-top boxes. 53. R&D can also enable the BBC to deliver new forms of value, linked to those purposes but not delivered through traditional TV, radio or online content. 8 Speech by Matthew Postgate at BBC Blue Room Presents Artificial Intelligence and Society, 10 July 2017 9 BBC Charter, s6 14

54. The BBC micro:bit provides an example from the 2007-16 Charter period a platform that enables children to become coders and makers by using a simple programmable device, developed in a collaborative project by 29 organisations, including ARM, Microsoft, Samsung, The Wellcome Trust and Lancaster University, as well as the BBC. Over 950,000 micro:bits have been delivered to UK schools to give to every year 7 student. 10 The micro:bit supports the public purpose of promoting education and learning, in a highly costeffective way: the project evaluation found that nine out of ten students who used the micro:bit agreed that it helped show them that anyone can code, and a similar proportion agreed that coding isn t as difficult as they thought it was. 39% of girls who used a micro:bit said they would definitely choose ICT/Computer Science as a subject option in the future, compared to 23% before using it. 11 55. Finally, BBC R&D carries out research that addresses the needs of particular groups that may be underserved by commercial providers. For example, to help ensure content is universally accessible R&D conducted user research into subtitles (used by over 7.6m UK adults, including 1.4m with hearing impediments 12 ). The results showed that audiences strongly preferred subtitle speeds that match the speed of speech, prompting Ofcom to revise its subtitling guidance, and enabling all broadcasters to deliver a better subtitling service. R&D chairs the Digital Video Broadcasting (DVB) subtitles group, and has worked on techniques to synchronise live subtitles. Giving the creative community the tools to fulfil the BBC s public purposes 56. Technology and creativity evolve hand-in-hand; each drives the other. A creative organisation with weak innovation capability risks falling behind in today s intensely competitive media market. In the BBC s case, early experiments with online and picture quality improvements paved the way for future mass market deployments that added great value to audiences experiences of the BBC, and ensured that the BBC remained competitive. In the 2017-27 Charter period, the same may be true of Virtual Reality (VR) and Augmented Reality (AR). Sometimes technologies do not achieve the impact that the market expects, as with 3D TV, although they often deliver insights that prove valuable in other areas. R&D must balance the need to ensure the BBC remains relevant and competitive with the inevitable risk of experimenting with early-stage technology. 57. Three examples illustrate the symbiotic relationship between technology and creativity. First, in 2015, BBC R&D and BBC Television launched BBC Taster as a platform to host the experimental pilots being developed within BBC Connected Studio and across the BBC. The BBC has since opened up the platform to other British cultural organisations, for example the Ai Weiwei 360 at the Royal Academy, thereby making it possible for people who could not come to London to explore the exhibition. BBC Taster facilitates engagement between audiences and storytellers; audience members provide feedback on their experiences and content makers explain the concept and how it was made. 200,000 visitors come to BBC 10 Every Year 7 student in England and Wales, every Year 8 student in Northern Ireland, and every S1 student in Scotland 11 Source: Discovery Research online survey conducted July 2016, among a representative sample of 405 x UK Year 7 students. http://www.bbc.co.uk/mediacentre/latestnews/2017/microbit-first-year 12 Ofcom, Ofcom publishes third report on quality of live TV subtitles, May 2015 15

Taster each month, and 78% of people who rate a pilot provide detailed feedback about their experience. 58. Secondly, Redux. The BBC owns one of the largest audiovisual archives in the world. However, prior to 2007 the archive lived on physical tapes that had to be requested from facilities at Elstree and physically delivered to wherever the person who wanted them was based. It was very difficult to search this archive and extract content from it. BBC R&D built Redux, a tool to capture television and radio programming directly from broadcast and store relevant data alongside it, creating a recent archive that is instantly searchable and accessible. This tool has enabled BBC creative teams to experiment with using the content and associated data in different ways, giving them access to the 3m programmes stored on the platform, enabling rich creative uses of archive material as well as saving money. Snippets, software that automatically matches broadcast subtitles to the broadcast output, makes Redux even more useful to content makers as it can navigate a user to the exact point in the programme where a search term or phrase is used. Users can then easily snip the relevant clip for use in their content. BBC users snip over 44k clips each year and users report that the system saves them significant time researching, requesting, and transcoding archive content. In addition, Redux/Snippets has increased the amount of archive footage that producers use in their content, improving the quality of programming, and in cases of news and historical programming, preserving the UK s cultural history. Redux also delivered a number of wider benefits, including contributing some of the technology that supported early versions of BBC iplayer, and developing meta data and tagging capabilities used in the newsroom. 59. Thirdly, the BBC has found that, in the hands of skilled storytellers, data itself can make interesting content. For the latest series of Child of our Time 13 R&D built a mobile application to collect and analyse mobile phone usage amongst the show s 25 teenagers. The application captured data on screen time, apps, web history, calls and messages, while safeguarding the teenagers privacy. The data and its visualisations became the organising principle of the show s narrative, and were used to explore how their phone use impacted the children s friendships, sleep and anxiety. The episode was watched by over 2.4m viewers. BBC R&D also used its data science expertise to analyse five years of chart-topping songs to understand the composition of the perfect song for The Secret Science of Pop. 14 Working with academics from several universities, BBC R&D used signal processing techniques to evaluate variables such as tempo, key, melody, and rhythm to develop a unique blueprint for each song. The Secret Science of Pop explored this analysis in depth, applying the findings to predict which songs submitted to BBC Introducing would succeed. Cost-effective innovation and value for money 60. R&D can help deliver financial benefit to licence fee payers in a number of ways. It can help reduce the BBC s direct costs, or avoid anticipated future cost increases; for example, the BIDI project (see section 4) will give the BBC more control over its Internet distribution costs, saving money in this increasingly business-critical area. DotEcon assessed the savings from Redux, described above, at between 53-59m over the 2007-16 Charter period, 13 http://www.bbc.co.uk/programmes/b0072bk8 14 http://www.bbc.co.uk/programmes/b08gk664 16

achieved at a cost of 1.4m. R&D can also make innovation affordable by creating efficient ways to deploy new technologies, such as the AS-11 file standard that has dramatically simplified production processes by making all content files interoperable. 61. And R&D can create assets capable of commercial exploitation, delivering returns that are ploughed back into content and offset cuts in licence fee funding, such as the Piero sports graphics system, described in section 4. The BBC Agreement recognises that the BBC will sometimes face trade-offs between generating revenue through commercial exploitation of its intellectual property, and the value that might be delivered to the public and the UK economy by making new developments widely and openly available. It requires the BBC to achieve an appropriate balance between these two aims. Neither is dominant, and the right balance has to be judged on a case by case basis. R&D s patent portfolio is an important tool in achieving this balance it enables the BBC to explore commercial opportunities, working with partners, but also gives the BBC influence over how the technologies it has developed are used and built on, including making them freely available or licensed on fair, reasonable and non-discriminatory terms. Delivering value to industry and the UK 62. R&D s approach has always been collaborative and open, seeking to bring the benefits of its work to the wider industry. Key relationships in the 2007-16 Charter include its joint venture platforms (Freeview, Freesat and YouView, co-owned by the BBC, other broadcasters and network operators); the forums it created to develop innovative IP production technologies; and its participation in Internet and mobile standards groups. 63. BBC R&D provides platforms that offer new routes to market for creative talent, entrepreneurs and developers. For example, the BBC Backstage programme built a community of web developers who created new experiences using BBC assets. It made available BBC data on a trial basis for third parties to use in online projects. The programme generated over 500 prototypes over five years. The programme s successor, BBC Connected Studio, sought to make it easier for SMEs to work with the BBC on innovation projects, including streamlining procurement processes, and simplifying contracts and intellectual property arrangements. Over 520 companies have participated in the programme s workshops, studios, and requests for proposals, yielding 168 contracts for the development and testing of new online concepts. BBC News Labs (an innovation incubator that works with academic institutions and other news organisations to develop storytelling tools and open standards for news) and BBC Reality Labs (a similar collaborative project on VR and AR) evolved from BBC Connected Studio initiatives. 64. The BBC s scale, technical capability, audience reach and independence enable it to play a convening role, bringing partners together to work collaboratively on behalf of the wider sector. While this may cause tension with organisations with different strategic agendas, both the qualitative and economic assessment carried out for this review (described in section 4) suggest that the pros of coordination outweighed the cons. 65. R&D has been particularly influential in driving the development of open standards, interoperable technologies and open platforms. Industry forums, whether UK, regional or global, play a central role in defining the way new technologies are developed. R&D s 17

contribution has helped to ensure that new technologies are widely available and capable of being used by all industry players, and that standards and technical profiles meet the BBC s and other broadcasters needs, including increasingly engaging in mobile and Internet standards and industry groups (more detail in section 5). This contribution has been vital in enabling broadcasters to bring new services to market, ensuring they are reliable and capable of being rolled out across multiple receiving devices and browsers. 66. For example, BBC R&D has a long-standing relationship with NHK, the Japanese public service broadcaster. Joint activities range from advances in video compression techniques to co-development of a technique for delivering more vivid colours, known as high dynamic range (HDR), with a solution called Hybrid Log Gamma (HLG) (see section 4). R&D is working with consumer electronics manufacturers to ensure that televisions in the market are able to receive and display HLG content, including making test content available. It has also provided advice and insight to other content providers, including YouTube, who subsequently adopted the HLG standard for UHD content. 67. The BBC has also pioneered new IP-enabled live production techniques. In doing this it has convened suppliers to the broadcast industry in a global effort to create interoperable solutions. These solutions represent valuable new products for those suppliers and create an attractive capability to the broadcasters that buy them. As these products are taken up by broadcasters they promise to reduce broadcast costs, for example in coverage of live event, delivering high quality broadcasts without the need for full-scale crews and infrastructure. 68. These activities deliver value not only to the BBC, but to the wider economy, both through direct benefits to partners and spillover benefits to the wider broadcast and audiovisual sectors. DotEcon s analysis of these benefits in the 2007-16 Charter period is summarised in section 4. 18

4. Assessment of the impact of BBC R&D, 2007-16 BBC R&D employs just over 200 people 69. BBC R&D currently employs c. 205 people, based in research laboratories in Salford and London. Its workforce is comprised of specialist research engineers, scientists, ethnographers, designers, producers and innovation professionals working on every aspect of the broadcast chain. R&D teams work with industry and academia to lead the invention of new forms of content and new ways to deliver it, increasingly focused on Internetenabled technologies. R&D staff also work alongside BBC experts in other creative and technical teams. 70. Over the course of the 2007-16 Charter, BBC R&D costs amounted to 161m. This section assesses the impact of the BBC s R&D activities over that period, with respect to audience outcomes, value for money, benefits to industry and economic value to the UK. This draws on both the internal qualitative analysis conducted by the BBC and the independent economic analysis conducted by DotEcon. Both studies are based on an analysis of a range of illustrative examples of R&D activity, and do not seek to describe everything R&D does. However, DotEcon has developed aggregate estimates of R&D s total economic benefit, based on its analysis of selected case studies, and described towards the end of this section. BBC R&D delivered benefits to audiences and society 71. In the 2007-16 Charter period, BBC R&D sought to innovate in the nature of the content the BBC provided to audiences, production tools and technologies, and methods of distribution. Improvements included better picture quality, innovative sport graphics, greater accessibility through improved subtitles, and many other new information and entertainment experiences. R&D innovation also enhanced the BBC s coverage of national events like the UK General Election, Glastonbury, and the Olympics. New creative experiences 72. BBC R&D played an active role in helping the BBC to evaluate emerging new technologies and to develop, test and trial new experiences and their suitability for different content genres. For example, BBC R&D s early activities in commissioning 360-video and VR made the department a key resource for the rest of the BBC, demonstrating what is possible and providing expert advice on VR technology and storytelling techniques to help make VR productions across several genres. In 2017, the BBC created a new VR Hub to manage all BBC VR commissions, appointing BBC R&D s VR lead as the Head of VR Commissioning. Two of BBC R&D s VR commissions won prestigious awards: a. The Turning Forest, 15 an animated VR film, won the TVB Award for Achievement in Sound, and it has been downloaded tens of thousands of times across the world; and 15 http://www.bbc.co.uk/taster/projects/turning-forest 19

b. We Wait, 16 an animated VR story about the refugee crisis told from the perspective of a Syrian refugee, won the Broadcast Digital Award for Best VR Experience 73. BBC R&D worked with partners to develop binaural audio in a pioneering, long-range initiative which involved five years of development. Binaural audio creates a spatial soundscape for headphone listeners, as if the listener were physically present at the scene. It gives the audience the impression that a sound source is located at a given location in space, so that the listener perceives sounds to be coming from above, behind, below, left and right. BBC Radio 3 and Radio 4 made several plays and concerts available in binaural audio and a binaural episode of Doctor Who was created, Knock, Knock, which enhanced the creepiness of the show by letting the house at the centre of the story creak all around the listener. 74. Finally, BBC Taster, described in section 3, had significant audience impact. In 2016, it averaged over 200,000 monthly viewers, with an average of 3.8 page views per visitor. Of over 250 pilots, 46 were rated at 4 or 5 stars out of 5. BBC Sport s Live Guide beta, a webpage that lists current, upcoming, and catch-up BBC Sports coverage, received 2.1m page views; Your Story, an interactive feature that shows world history through a personalised timeline and won the World Summit Award for emedia and Journalism, gained over 1.8m page views. Enhanced quality 75. Improving TV picture quality was a major focus of the last few years, which R&D was intimately involved in, including ensuring that free-to-air terrestrial TV viewers were not left behind by the move to HDTV. HD uses five times more pixels than standard definition (SD) and requires more data to transmit its richer images. BBC R&D chaired the international committee that developed DVB-T2 and engaged with industry to encourage adoption of the standard. DVB-T2 is a technical specification that enabled HD broadcasts on digital terrestrial TV and is more efficient and resilient than its predecessor, DVB-T, and its implementation, together with the adoption of MPEG-4 compression, initially freed up the capacity to launch three high-definition channels without requiring a reduction in the number of standard definition channels. BBC R&D s ongoing work to optimise capacity on the terrestrial platform enabled the launch of three additional HD and two SD channels on the BBC s multiplex over the Charter period. DotEcon assessed that R&D s contribution had helped to bring forward the launch of HD on terrestrial TV by three years, delivering a total economic benefit of 77-152m, for a cost to BBC R&D of 2.8m. 76. BBC R&D continues to lead the industry in preparing for the next step-change in picture quality, Ultra HD (UHD). In collaboration with the Japanese public broadcaster, NHK, BBC R&D invented and standardised the high dynamic range (HDR) standard that enables improved picture colour and detail in lowlights and highlights. The BBC s hybrid-log gamma (HLG) solution, developed in collaboration with NHK, was adopted as part of the ITU BT.2100 standard and ensures compatibility with existing production equipment. The BBC has already started using HLG, for example by post-producing Planet Earth II in HLG HDR, 16 http://www.bbc.co.uk/taster/projects/we-wait 20